Playtime's over. Time to pay up, pops. (Photo Credit: ThinkStock)
As of now, the National Debt Clock reads nearly $13.5 trillion. That’s what the United States government owes to satisfy its debts. Individual debt is separate and equally massive. Atlantic Magazine argues that it can’t be an infinite spiral. As the nation’s annual gross domestic product is only about $14 trillion, someone has to step up to the plate and clear the bases, because they’ve been clogged for too long. Atlantic’s humble suggestion is that the “lazy, self-indulgent, drugged-out, draft-dodging, mincing flower-power hippies” who moved on to Wall Street and began chanting the mantra “greed is good” should clean up the mess they caused. The Baby Boomers, in other words, are on the hook.
Amidst the tongue-in-cheek, a real call for Baby Boomer action
Paying off the national debt seems impossible. “Raising taxes by even 1 percent of GDP would be a triumph of leadership … and fatal to the career of whomever proposed it,” writes the Atlantic. Yet if Baby Boomers were to pick up the pieces before moving on, it would be quite a parting gift – and it could possibly be handled via estate taxes, suggests Atlantic. The publication cites a 1999 study estimating that $41 trillion will be transferred from parents to children and grandchildren from 1999 to 2052. If just 20 percent of that sum is collected via something related to but rather different than the federal estate tax that may be reinstated in 2011, more than $8 trillion in tax revenue would be generated.
It isn’t taxing the same income twice
The criticism levied by some is that estate taxes are unfair because it amounts to taxing someone’s income two times: when it’s earned and when the person dies. However, this is incorrect, as most of what estate holders have near the end does not consist of wages, but “unrealized capital gains,” as Atlantic puts it. It’s property. If the property isn’t sold, income tax isn’t paid, which is a significant tax loophole. The Atlantic’s suggestion – the “Boomer Tax” – would only apply to capital gains, not wages.
Even the average household can contribute, says the Fed
For those who aren’t convinced, consider a recent Federal Reserve study. Atlantic writes that “the average American household aged 65 to 74 has assets worth more than $1 million.” Factor in illness and increased medical care after that age window and the figure gets cut approximately in half. In other words, it falls below the estate tax threshold of $1 million. If there were a tax on Social Security – which sent out $682 billion in checks in 2009 – America would be that much closer to closing the deficit. There would have to be sufficient incentive to induce the heirs of the deceased to return their Baby Boomer parents’ unused Social Security, however, or the estate holder would spend it down before death. Which could come sooner rather than later if health care rationing were to become the norm, as Atlantic suggests.
While these ideas are decidedly unpopular in the current political climate, Atlantic suggests that they would pay down the national debt. It would be a gift of great magnitude from Baby Boomers to future generations of Americans.
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Borrow your way to wealth!
The government might want to take some initiative in this and cut its spending habits way back before asking a sector of the public to fix the problem it helped create. Paying off the debt alone wouldnt keep it from happening again if the same spending problem exists.